What: Analysts view the pandemic’s contribution to the boom in luxury sales as ‘outsized’ and predict a normalization on the horizon.

Why it is important: The post-pandemic revenge spending seen outside of China is expected to dampen in the coming months as recession, inflation, and Chinese economic policies may begin to weigh on luxury consumers.

Looking at Richemont and Burberry, double-digit first-quarter postings show that clients are eagerly shopping as restrictions have been lifted, but background politics and macro trends loom heavy on the market.

Richemont’s sales in Europe grew by 42%, due to “robust domestic demand,” and a return in tourist spending, primarily from American and Middle Eastern clients. Growth was strong across markets, particularly in France where sales increased in the triple digits.

Mainland China was a drag on growth due to COVID-19-related lockdowns, but other countries in the APAC region helped to mitigate those declines. In the 13 weeks to July 2, Burberry’s retail revenue increased 5.4% to 505 million pounds, while at constant exchange, growth was flat.

Burberry surprised the markets with a 1% uptick in comparable store sales after analysts had predicted a 2% contraction. Like Richemont, Burberry also saw strong demand in Europe, with comparable-store sales growing 47% due to demand from local clients and sales to American tourists.

However, Richemont saw better growth overall, reporting sales in the Americas region climbing to 79% and putting it on par with Europe as one of Richemont’s most lucrative regions. Mainland China trends are promising as well with demand for Richemont’s big-ticket items remaining strong. The luxury fashion market stability will be impacted by the consumer sentiment towards macro trends affecting the global economy.

Uncertain longevity for boom in luxury sales